London Session Forex Recap – June 29, 2016

  • Italy on bank holiday today
  • German GFK consumer sentiment: 10.1 vs. unchanged at 9.8 expected
  • Swiss UBS consumption indicator: 1.35 vs. 1.24 previous
  • UK Nationwide HPI m/m: 0.2% vs. 0.1% expected, 0.2% previous
  • UK Nationwide HPI y/y: 5.1% vs. 4.9% expected, 4.7% previous
  • UK secured lending: £2.8B vs. £2.2B expected, £0.1B previous
  • UK net consumer credit: £1.5B as expected vs. £1.3B previous
  • UK mortgage approvals: 67K vs. 63.5K expected, 66.2K previous
  • Euro Zone consumer sentiment: unchanged at -7.3 as expected
  • Euro Zone economic sentiment: 104.4 vs. 104.7 expected, 104.6 previous
  • German HICP m/m: 0.1% as expected vs. 0.4% previous
  • German HICP y/y: 0.2% as expected vs. 0.0% previous

Looks like risk appetite is here to stay, so the higher-yielding comdolls benefited a lot while the safe-havens got slapped lower during today’s morning London session. The pound, meanwhile, continued to trend higher.

Major Events/Reports:

UK mortgage activity recovers – The number of mortgage approvals in May came in at 67K, beating expectations that it will slump lower to 63.5K and recovering slightly from April’s 11-month low of 66K.

Even more from Fitch – The US ratings agency already downgraded its credit rating for the UK and even the BOE yesterday, as well as warning that some EU member states are at risk from an actual Brexit.

Well, that’s not the end of it apparently, since Fitch released a statement earlier today saying that it expects investment in the UK to drop by 5% in 2017 while consumer spending is expected to see a “mild decline” in the same year. These, according to Fitch, would result in a 1% drop in the UK’s economic growth for both 2017 and 2018.

As for the euro zone, Fitch expects that it “will suffer a larger shock from weaker UK demand and the depreciation of the pound, but for the block as a whole, growth adjustments will likely be significantly smaller than for the UK.”

Other than that, Fitch also said that “Further Fed tightening is now likely to be delayed until December 2016 and the ECB is expected to persist with asset purchases beyond March 2017. The Bank of England is likely to lower interest rates to 25 bps later this year.”

Another risk-on session – Looks like the risk-taking that started yesterday is here to stay, with the pan-European FTSEurofirst 300 up by 2.22% to 1,280.26, the blue-chip Euro Stoxx 50 up by 2.42% to 2,820.50, the UK’s FTSE 100 up by 2.01% to 6,264.00, and the DAX up by 1.45% to 9,584.50.

U.S. equity futures were also signalling that the risk-on vibes will carry over into the upcoming US session since the S&P 500 futures index was up by 0.52% to 2,039.00 while the Nasdaq futures index was up by 0.58% to 4,305.75 near the end of the session.

Market analysts attributed the risk-taking activity to calming nerves over the pro-Brexit vote, although bargain-buying and profit-taking may also be in play.

However, some market analysts also pointed out that healthcare companies were in the lead, and they attributed this to the weaker pound since revenues from healthcare companies, especially pharmaceutical companies, come from overseas.

Commodities climb higher – European equities and US equity futures weren’t the only one in rally mode since most commodities were also in the green during the morning London session.

Precious metals registered gains, with gold up by 0.50% to $1,324.50 per troy ounce and silver up by 2.86% to $18.400 per troy ounce.  While oil benchmarks were also on a high note, with US crude oil up by 0.86% to $48.26 per barrel and Brent crude oil up by 0.40% to $49.66 per barrel.

Some base metals were in slightly the red, however, with copper down by 0.16% to $2.172 per pound. And this was due to softer industrial demand, according to some market analysts.

Major Currency Movers:

GBP – Calming nerves in the aftermath of the pro-Brexit vote allowed the pound to calmly continue its recovery. The euro was more mixed, however, since it did well against the safe-havens but got clobbered by the comdolls and the pound.

GBP/USD was up by 92 pips (+0.70%) to 1.3432, GBP/JPY was up by 153 pips (+1.13%) to 137.98, GBP/CHF was up by 64 pips (+0.50%) to 1.3161

Comdolls – Steady risk appetite and higher commodity prices during the morning London session naturally meant that the higher-yielding comdolls (CAD, AUD, NZD) were in demand at the expense of the safe-haven currencies.

NZD/USD was up by 40 pips (+0.55%) to 0.7120, NZD/CHF was up by 25 pips (+0.37%) to 0.6977, NZD/JPY was up by 72 pips (+0.99%) to 73.14

AUD/USD was up by 39 pips (+0.54%) to 0.7434, AUD/JPY was up by 73 pips (+0.97%) to 76.35, AUD/CHF was up by 23 pips (+0.32%) to 0.7283

USD/CAD was down by 34 pips (-0.27%) to 1.2989, EUR/CAD was down by 17 pips (-0.12%) to 1.4403, CAD/JPY was up by 54 pips (+0.69%) to 79.05

Watch Out For:

  • 12:30 pm GMT: US personal income (0.3% expected, 0.4% previous)
  • 12:30 pm GMT: US personal spending (0.4% expected, 1.0% previous)
  • 12:30 pm GMT: US core PCE price index (0.2% expected, same as previous)
  • 2:00 pm GMT: US pending home sales (-1.1% expected, 5.1% previous)
  • 2:30 pm GMT: US crude oil inventories (-2.3M expected, -0.9M previous)
  • 8:30 pm GMT: US Fed’s bank stress test results will be released
  • 10:45 pm GMT: New Zealand’s building permits (6.6% previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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